All about government’s employment-linked incentive scheme

Union Budget 2024 laid a great emphasis on employment creation. Part of the Prime Minister’s five packages to boost economic growth, one set of schemes focus on generating employment. The focus is upskilling young people, and providing incentives to employers to hire more people.

There are a total of three schemes that are part of employment-linked incentive schemes. Here are the the details—

Scheme A: Hiring of first-time employees: Through enrolments into EPFO, the government plans to pay out one-month’s wage up to ₹15,000 to first-time employees. The amount will be paid in three instalments for each first-timer hired by businesses, with salary of up to ₹1 lakh.

Scheme B: Promotion of employment in the manufacturing sector. On incremental expenditure through new enrolments into the EPFO, companies will get support on the employer’s contribution to the EPFO. This will be paid to both the employer and employee. The reimbursement of EPFO contributions will be provided for four years.

Scheme C: Additional reimbursements of EPFO contributions (including to the employee) up to ₹3,000 per month for each additional employee hired for two years to employers.

How many people will benefit from these schemes?

The total employment generation target over five years through the government’s employment-linked schemes, and other ancillary schemes is around 4 crore in five years. The total expected outlay is nearly ₹2 lakh crore.

Each scheme has a specific focus and the expected beneficiaries for the employment-linked incentive schemes are as follows—

Focus of employment-linked incentive scheme

The focus of these schemes is to generate employment in the formal sector, by incentivising enrolment into EPFO. This will provide a social safety net for new employees, and also lessen the burden on the employers who are dithering from hiring people.

While the government’s production-linked incentive schemes are promotion domestic capacity additions, it hasn’t led to generation of employment at a large scale as expected.

These employment-linked incentive schemes, with their broad design, will hopefully nudge companies to hire more people and generate employment.

Skilling focused employment schemes

When we look at the above schemes in sync with the internship promotion schemes, the plan seems to be to support upskilling by subsidising the intern’s living costs by a providing a total of ₹60,000 assistance for over a year, and an additional ₹6,000 one-time assistance.

Once the internship is over, the intern could seek a job as a first-timer. Here too the three schemes will help in terms of providing the employer and employer financial support through EPFO contribution reimbursements, and additional incentives for the manufacturing sector.

The aim is to work with the private sector to upgrade the skills of young people, while at the same time promoting employment creation. The schemes will run for 5 years to achieve this objective.